The price of transport

Overview of the social costs of transport

Summary:

This study provides a detailed review of the structure and magnitude of the external costs of passenger and freight transport in the Netherlands and the extent to which these costs are covered by user charges. It thus provides potentially important input to pricing policy discussions and design. The report, an update of our 1999 study �Efficient prices for transport�, was written in close collaboration with the Free University, Amsterdam. The study was commissioned by the Dutch Transport ministry as part of the preparatory work for its new policy paper on transport mobility. The study, with 2002 as its reference year, covers all the main modes of passenger and freight transport by road, rail and inland waterway. It details all the various costs and charges associated with each and how these are currently allocated across user groups. The following costs were considered: infrastructure construction; infrastructure maintenance and operation; infrastructure land take (direct and indirect, incl. parking); traffic safety; climate change (CO2 emissions); air pollution (NOX, PM10, HC and SO2 emissions); and congestion. For each of these we calculated both the variable user costs, i.e. those that are a direct function of transport performance, and the total social costs. The variable costs are the key issue for government when it comes to using pricing policy to maximise social welfare. From this �efficiency� perspective, a user charge equal to the variable external costs of the transport mode in question is in order. As these costs vary substantially across vehicles and traffic situations, we calculated with best and worst case scenarios. In the case of total social costs, it is essentially the principle of �fairness� that is at stake and the degree to which these costs are passed on to user groups. The main conclusion of the study is that there is not a single category of road or rail vehicle or inland shipping vessel that �pays its way� in terms of the total social costs to which it gives rise being fully recovered via user charges. Neither is there a single category of vehicle or vessel for which variable costs are fully covered by standing variable charges. This implies that the variable costs of all these means of transport would rise if the variable external costs were passed on to users. The only exception here is the best case scenario for petrol-fuelled passenger cars (no congestion, non-urban traffic, vehicle up to latest emission standards).